Stephen Hester, the chief executive of Royal Bank of Scotland (RBS), is poised to be awarded an annual bonus of less than £1m, a decision that the bank and ministers hope will defuse the intensifying row over his pay.I have learned that RBSís directors agreed the payout at a board meeting yesterday. The bonus for Hester of approximately 3m shares (about half his entitlement) will equate to between £800,000 and £950,000 at yesterdayís closing share price. It will be paid entirely in RBS stock and will be deferred for three years.If confirmed, the news will please David Cameron. The prime minister has made it clear in private that he would regard a bonus of more than £1m as unacceptable. Last year Hester was awarded an all-share bonus worth just over £2m.RBS, which is 82 per cent-owned by the taxpayer, is hoping to announce details of Hesterís remuneration as early as tomorrow. Iím told that Downing Street has urged RBS to disclose the details as soon as possible in an attempt to end escalating tensions over the issue. That timetable could, nevertheless be delayed or even brought forward to today, depending upon how the talks progress.I understand that RBS is holding discussions today with UK Financial Investments (UKFI), the Treasury body which manages the taxpayerís stakes in Britainís rescued banks, about its plans. UKFI is likely to issue a statement backing the award when it is announced by RBS although it is possible that the final amount could change as a result of todayís discussions, Iím told.Last week, RBS and Mr Cameron denied a newspaper report that the bankís board was proposing to award Mr Hester a bonus of up to £1.6m.Iím told that in addition to Hesterís annual bonus, RBS will disclose the details of his annual award under the bankís long-term incentive plan. This, City sources speculated, could be worth a further £1m-£2m, which would take his total pay package for the year Ė including his salary of £1.2m Ė to between £3m and £4m. (I should point out that that last figure is based on conjecture.)

RBS chief executive Stephen Hester is likely to be offered a potential bonus of 12 million shares for 2012, according to Sky News sources.

Mr Hester is already under intense pressure to refuse a bonus of just under £1m he has been awarded for his work in 2011.

But now Sky's city editor Mark Kleinman has discovered the bank's remuneration committee has been discussing his reward for his work this year.

It is expected to announce its plans in February.

A bonus of 12 million shares in the bank, which is 83% owned by the taxpayer, would be worth more than £3m based on the current share price.

The development will inflame the ongoing row about Mr Hester's pay and comes as RBS chairman Sir Philip Hampton revealed he is not accepting his £1.4m bonus for 2011.

Cameron On RBS Boss Hester's Bonus

Kleinman said the move was designed to "take the heat off" Mr Hester but it risks backfiring.

"Sir Philip Hampton believes that by relinquishing his own award, he will help to defuse the row over bonuses at RBS," he wrote.

A source at the bank said the decision was unlikely to change Mr Hester's position.

Sir Philip was appointed as chairman of RBS after its £45bn taxpayer rescue in Autumn 2008.

On Thursday, he defended the decision to award Mr Hester a bonus.

"The board is aware of the difficulties in trying to reconcile the competing objectives of all our stakeholders. This is especially true on the issue of pay," he said.

"His (Hester's) pay is strongly geared to the recovery of RBS, which he was recruited to turn around, having played no part in its collapse.

"The priority is to reshape a business that was far too big and far too risky, reducing legacy losses whilst improving performance in the group's core businesses."

Hampton is, I'm told, worried that Hester will resign if he becomes seen as one of the villains of the banking sector on anything like a sustained basis.

Sky's City editor Mark Kleinmann

Prime Minister David Cameron insisted it was up to Mr Hester to decide whether to give up his bonus.

"It's a matter for him," he said at Chequers. "It's obviously his decision. My decision is to make sure the team at RBS get on with the job of turning the bank round."

He added: "I think we need to get the facts straight. The fact is Stephen Hester was brought in by the last government, a contract signed by the last government to turn round RBS - a bank that had got itself into a complete mess.

"The Government has made its views known and that is why his bonus was cut in half compared to last year but we do have to bear in mind that the alternatives to what's happening now could be even more expensive if you had a whole new team coming into RBS."

Boardrooms should "wake up" to the gap between sky high executive pay and public opinion, according to a new report.

A survey conducted for the independent monitoring body the High Pay Centre found most people in Britain would like to see executive pay reduced, with many believing top bosses pay is unfair and unjustified.

Only 7% of those questioned think the chief executive of a FTSE 100 company should earn more than £1m a year, including bonuses and pension contributions.

Just 1% believe Britain's bosses were worth the £4m plus which is now the average for the heads of FTSE 100 companies.

Runaway executive pay has undermined the public's trust in business and we believe Parliament and the business community should take stronger action to curb it.

Deborah Hargreaves, director of The High Pay Centre

The High Pay Centre's director Deborah Hargreaves said: "Top executive pay and the behaviour of business are issues at the heart of the current public debate about how we rebuild our economy.

"Our polling shows the public do not believe executives, even of the biggest companies, should be awarded multi-million pound pay packages. It is time for boardrooms to wake up to what is fair and act now to rebuild public trust."

The ICM survey comes as the row rumbles on over Royal Bank of Scotland chief executive Stephen Hester's share bonus for 2011, which is worth almost £1m.

Sir Philip Hampton, the chairman of the bank which is 83% owned by the taxpayer, has said he will waive his £1.4m bonus.

But Mr Hester has not said he will reject his and now Sky's City editor Mark Kleinman has discovered he could receive up to 12 million shares as a bonus for his work in 2012.

Prime Minister David Cameron has sidestepped calls to block his current handout and said it was up to Mr Hester whether he chose to reject it or not.

The High Pay Centre says two-thirds of those surveyed would like to see ordinary workers included on the remuneration committees that set bosses pay.

The Royal Bank of Scotland has announced that its chief executive Stephen Hester has decided to waive his £1m share bonus.

It comes just hours after the Labour Party said it would force a House of Commons vote calling for Mr Hester to be stripped of his RBS bonus.

Mr Hester had been facing mounting pressure to follow the bank's chairman, Sir Philip Hampton, and forego the bonus which he was awarded this week.

We need a Government that will tax bankers' bonuses and bring responsibility to the boardroom.

Labour leader Ed Miliband

Sky News City editor Mark Kleinman said: "My understanding in is that Mr Hester is abroad on holiday at the moment and only made the decision on Sunday night.

"RBS shares are now languishing so much that British taxpayers risk a loss of £10bn on their investment."

Kleinman added: "Stephen Hester has decided, after days of mounting criticism about his million-pound bonus award, to relinquish that bonus.

"He has decided to waive it and he will not accept the 3.6 million shares that he was granted by the board of directors.

"He has been saying to friends over the last few days that he does not see any reason why he should give up that bonus, but I think the political pressure on him has become intolerable.

Chuka Umunna: He's Done The Right Thing

"The Labour Party called for a vote in the Commons on the issue and Mr Hester is said by friends of his to be deeply concerned by the fact that he is becoming a pariah of the banking sector, despite the fact that he was parachuted in to help turn RBS around after it was bailed out by British taxpayers in 2008.

"This is clearly an attempt by him to prevent the escalating row over his bonus, distracting him from the job of running RBS, which is one of the biggest corporate turnarounds in the history of the banking sector."

Shadow business secretary Chuka Umunna, who criticised the payment, said Mr Hester was finally responding to public sentiment.

He told Sky News: "He is responding to public concern and criticism about the level of renegotiation in the bank, in particular in relation to his position.

"For somebody to listen and respond, we of course would not criticise that."

He added: "Of course, the financial sector should be able to operate properly, but it needs to command the confidence of the British people."

Sky News chief political correspondent Jon Craig said Mr Hester came under pressure from the Government and Prime Minister David Cameron would be "relieved".

"He will be relieved because he had been made to look rather foolish and he has been criticised by the Labour Party and by some of the Lib Dems for not do more to prevent this happening," he said.

According to a near 500-page document released by the Financial Services Authority, RBS required a 2008 £45.5bn rescue after near-collapse came from business errors and light financial regulation during the leadership of Sir Fred Goodwin.

RBS is now 82% owned by the Government and thus under extra scrutiny when it comes to banker remuneration.

Labour leader Ed Miliband said foregoing the bonus was "the right thing".

Mr Miliband said: "It is a shame that a feeble, out of touch David Cameron did not realise he should do the right thing and stand up for the interests of the British people.

"Labour was right to seek a parliamentary vote on this so that the people's voice could be heard. But the debate about fair executive pay and responsible capitalism is only just beginning.

"We need a Government that will tax bankers' bonuses and bring responsibility to the boardroom."

Chancellor George Osborne also said the decision was "sensible".

He now hoped Mr Hester could "focus on the very important job he has got to do, namely to get back billions of pounds of taxpayers' money that was put into RBS".

Taxpayers' Alliance spokesman Matthew Sinclair said that both Labour and the current Government had let down the British public over successive years with RBS.

He told Sky News: "The Government needs to ensure the company is being run in the interest of the taxpayer and not its staff."

Scottish First Minister Alex Salmond said: "This is a welcome development but it should never have come to this stage as these circumstances cannot be left to individual decisions. They must be a matter of public policy."

=============================================

Hester was employed by Gordon Brown and in his first year of Office, shares have reduced to 27 pence, yet it was not the shareholders who forcedthis decision , it was David Cameron.

A young Investment Manager just discussing the news that Hester has reluctantly agreed not to accept the Bonus shares said he had done a good job at RBS and increased the price of shares by 25% in his first Year. He suggested that when the likes of Rooney can be paid exhorbitant sums for kicking a Ball around ,where is the logic.?

Why do these high flying supermen have to be paid a bonus for doing the job they contracted to do? Especially a job which pays more than £1 million a year plus expenses with a car and chauffeur thrown in...

Why doesn't someone wake Miliband up and tell him to keep his childish mouth shut and stop embarrassing New Labour which set the bonus payments for Hester? It appears the present bunch of New Labour knuckle draggers in opposition is just as corrupt and oafish as Blair and Brown's previous pack of looters were during their 13 years in office.

To view this content you need Flash and Javascript enabled in your browser.

Please download Flash from the Adobe download website.

6:16pm UK, Friday February 03, 2012

Mark Kleinman, City editor

Ministers should abandon a growing tendency to indulge in anti-business rhetoric or risk damaging Britain's economic recovery, the head of the state-controlled Royal Bank of Scotland (RBS) has warned.

In an interview with Sky News, Sir Philip Hampton said that leading politicians could undermine inward investment in the UK if they continued to demonise business.

He said: "I think we've got to watch it. I think some of the sentiment from Government ministers and [other] politicians recently won't necessarily help confidence in business morale and inward investment.

"We need to recognise that businesses have got to succeed and that when they do so people can get very well paid.

"But overall I think Britain is still a great place to invest, to work and to live. Iíd like some of those messages to be more prominent from our political leaders from time to time."

RBS bosses mis-judged the public mood over pay and bonuses

The comments from the chairman of a company which is 82% owned by the British taxpayer are remarkably frank - but they reflect a growing sense of unease within the business community following the furore over the pay of Stephen Hester, RBS's chief executive, and the decision to strip his predecessor, Fred Goodwin, of his knighthood.

Sir Philip's remarks come at the end of a torrid week for RBS, which is braced for further political anger later this month when the bank reports its financial results for 2011.

"We will have some people on very substantial packages but we will have far fewer than in recent years paid at the very highest levels. I would say some of this concentration on bonuses is overblown. Our wage bill for the bank is £8bn-9bn, so actually although bonuses get all the headlines they are a very small part of the total wage bill," he told Sky News.

Nonetheless, Sir Philip acknowledged that RBS would have to alter the way it paid its top executives if it is to avoid a similar row erupting in 12 months' time.

"It's a difficult issue, clearly - we've had a clear demonstration of the hostile public mood in the last week," he said.

"We could have got elements of our communications better. Having said that we are a commercial organisation and we have to pay rates of pay to our top people for this hugely challenging task that are reasonably consistent with the rest of the market otherwise I donít think we would be able to retain and incentivise the people we need to turn this bank around."

Former RBS boss Fred Goodwin was stripped of his knighthood

The RBS chairman, who was parachuted into the role alongside Hester in the autumn of 2008 when the bank was bailed out with a £45bn injection of taxpayers' money, rejected suggestions that pay at the bank was now being set by ministers rather than the RBS board.

"I made the recommendation about the remuneration of Stephen Hester, which was accepted and discussed by the board. We do consult with shareholders including the Government, both as a shareholder and on the political aspects of the decision.

"We havenít received any direction from government at all. We received their input which we try to take into account when we can."

Sir Philip denied that Hester had been on the verge of resigning over the decision to relinquish his bonus of 3.6m shares - worth just under £1m at the current share price - but admitted that the RBS board had drawn up plans for his departure.

"All boards of directors have contingency plans for chief executives being ill or leaving for other reasons.

"If you look around the world and try to find candidates to run one of the largest banks in the world in this exceptionally challenging environment, it is no surprise that thatís a very small list indeed of people who are ready, willing and able to do this sort of job."

He also defended the pay policy of RBS, saying it had been a pioneer in reforming the way bankers are remunerated.

Business secretary Vince Cable called for a crackdown on boardroom pay

"We have led the way in British banking terms in getting our pay structures more appropriately based - bonuses are all in shares, deferred and subject to claw back. We have ticked every corporate governance box, but we clearly are not carrying all our stakeholders along in the decision-making we are doing.

"It's very important that this bank does have the right people running it. We are hugely important to the British economy and the bank is two-thirds of the size of the economy on its own. Weíve got to get this right and weíll only get it right with the right people."

Referring to the crackdown by ministers on boardroom pay across British business, Sir Philip also told Sky News that he agreed with proposals outlined last month by Vince Cable, the Business Secretary.

"I think out-of-hand is too strong [a description for remuneration practices] but the culture of pay is certainly not where it should be. There is a concern that pay is too high, particularly when performance is weak," he said.

"The banking sector is at the epicentre of that. Returns to bank shareholder have been pretty mediocre to disastrous and yet banker pay has become massive, so there isn't a linkage. That is changing."